RALEIGH
Don't be surprised if Mickey Michaux and Barry Boardman are keeping an eye on the traffic outside their local mall or Wal-Mart leading up to the holidays.
Michaux, the chief budget-writer in the House, and Boardman, the legislature's chief economist, will be especially interested in the more important congestion around the cash registers.
With tax collections continuing a historic slide in North Carolina, the sales-tax rate going up another penny to close a budget gap and state unemployment at 11 percent, attention on taxes generated from Christmas retail sales is the strongest in recent memory.
"Everybody's anxious about the holiday sales," said Michaux, D-Durham. "This time it bears closer watching than it has in the past."
If sales-tax collections remain worse than projected, it could signal an economic recovery may take longer to reach the state, leading to additional spending cuts next year on top of those this year and a deeper budget hole to fill when federal stimulus money runs out in mid-2011.
"December to January will give us some idea where this thing is going," said Boardman, who works in the legislature's Fiscal Research Division. "It's important as a marker of whether we are continuing to slide down or whether we're flattening out and we can see a bump up in the near future."
North Carolina overall tax collections already were 1.5 percent less compared with what legislators projected through October, or the first four months of the fiscal year, when they wrote the current $19 billion state budget.
The $95 million shortfall is manageable for now. Gov. Bev Perdue already is holding back money to pay bills later in the year and analysts have projected a rebound in many state business sectors in 2010.
"Things look a little more stable," Perdue said recently.
But the decline is on top of a 1 to 2 percent revenue drop legislators expected for the entire year. And it follows a 10.9 percent reduction in actual revenues for the fiscal year ending last June 30, marking the worst year-to-year decline since at least 1970.
Boardman is concerned about sales taxes, which are down a whopping 11.7 percent so far this year compared with a 2.7 percent decline a year ago, adjusted for tax changes. At the current pace, the state could generate $100 million less on sales taxes alone this year, he said.
Polls released last week don't provide much hope that sales will rapidly rebound. A Conference Board survey found consumers nationwide only a little less gloomy than they were a year ago. An Associated Press-GfK poll found 93 percent of consumers surveyed planned to spend at the holiday less or about the same as last year.
Rep. Jim Crawford, another House budget-writer who owns a hardware store and a shopping center, said people don't want to spend because they've lost their jobs.
"We have got to get some people back to work," said Crawford, D-Granville, who worries the shortfall could reach between $400 million and $800 million when legislators reconvene in May to adjust the budget. "My retailers are just choking. They don't have enough business."
Neither Perdue nor Boardman put an estimate on a shortfall because it's too early in the fiscal year. Perdue's budget office may have more than $600 million in savings at its disposal to close a shortfall, but legislators still would have less money to work with in the new budget year starting in July.
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